Legal Ethics Opinion No. 1459
Conflict of Interest--Former Client--Attorney Joining Firm Which
Represents Clients Adverse to Former Firm; Attorney Asserting
Financial Interest in Fees Received by Former Firm in Cases Other
than Those Being Defended by New Firm
You state that Law Firm A has represented plaintiffs in
litigation. A partner of Firm A who worked on such litigation
has withdrawn from Firm A and joined Firm B which represents the
defendants in some of the cases initiated by Firm A. Firm B has
agreed to exclude the withdrawing partner from the pending
litigation by use of a Chinese Wall. The withdrawing partner,
however, continues to assert a financial interest in fees which
may be received by Firm A in certain cases other than those
defended by Firm B but which involve the same product.
You have requested that the committee opine as to the several
issues raised by the above-described factual situation.
The appropriate and controlling Disciplinary Rules related to
your inquiry are DR 2-105(D), which enumerates the three
requirements which must be met in order to properly make a
division of fees between lawyers who are not in the same firm; DR
5-101(A), which states that a lawyer shall not accept employment
if the exercise of his professional judgment on behalf of his
client may be affected by his own financial, business, property,
or personal interests, except with the consent of his client
after full and adequate disclosure under the circumstances; DR
5-105(D), which provides that a lawyer who has represented a
client in a matter shall not thereafter represent another person
in the same or substantially related matter if the interest of
that person is adverse in any material respect to the interest of
the former client, unless the former client consents after full
disclosure; and DR 5-l05(E) which disqualifies, vicariously, from
such employment the firm of any lawyer who himself is
disqualified under DR 5-l05.
With this background, the committee responds to your inquiries as
follows:
l. You have requested the committee's opinion as to
whether the withdrawing partner's assertion of a
financial interest in plaintiffs' litigation involving
the same issues as litigation defended by Firm B
precludes Firm B from continuing to represent
defendants absent the consent of all parties after full
disclosure.
The committee opines that as to fees owing from cases
completed before the withdrawing partner joined Firm B,
the assertion of a financial interest by the
withdrawing partner would not constitute a personal
interest as articulated in DR 5-101(A). Thus, Firm B
would not be precluded from continuing to represent
defendants as a result of the attorney's receipt of
those fees provided that Firm B's clients consent after
full disclosure.
As to fees owing from cases completed by Firm A afterthe withdrawing partner joined Firm B, the committee
believes that DR 2-105(D) and DR 5-101(A) are
controlling. The committee is of the opinion that it
would be improper for the withdrawing partner to assert
a financial interest in such cases unless: (1) the
lawyer can qualify under DR 2-l05(D) as, and the
clients (of Firm A) consent to the employment of,
additional counsel; (2) both Firm A and the withdrawing
partner are in a position to, and expressly assume
responsibility to the clients; and (3) the terms of the
division of the fee are disclosed to the clients and
the clients consent thereto. The committee believes,
as a practical matter, that the withdrawing partner is
precluded from expressly assuming responsibility to the
clients because of his new affiliation with Firm B.
Thus, the committee believes that it would be improper,
and violative of DR 2-105(D), for the withdrawing
partner to assert a financial interest in fees for
legal services provided by Firm A on cases subsequent
to his departure from Firm A. Therefore, the committee
opines that Firm B is also precluded from representing
defendants in those cases which continue following the
attorney's move from Firm A to Firm B. See also LEO
#l332.
2. As to what constitutes "full disclosure", the committee
directs your attention to prior LEOs #187, #1097,
#1198, and #1254 which concludes that disclosure is
adequate if it is such that the attorney's client is
able to make an informed decision as to whether or not
to give consent. The committee also opined that all
doubts regarding the sufficiency of the disclosure must
be resolved in favor of the client.
3. With regard to your question as to the efficacy of a
"Chinese Wall", the committee believes that the clear
language of DR 5-105(D), which requires the client's
consent, would dictate that such device would not be
effective here. The facts presented indicate that the
withdrawing partner worked on continuing litigation on
the other side of cases which continue in Firm B.
Under these circumstances, the committee opines that
absent the consent of the withdrawing partner's former
clients (various defendants in the litigation) after
full disclosure, it would be improper for the attorney
to personally represent plaintiffs and similarly
improper for his new firm to continue any such
representation. Such conduct would be improper whether
Firm A currently represented parties adverse to those
represented by Firm B or was subsequently contacted
about a claim against a manufacturer which had been
previously represented by the attorney who has moved
from Firm A to Firm B. The committee opines that the
only cure to such impropriety is the former clients'
consent, as described by DR 5-105(D), and that no cure
would be effected simply by a unilateral agreement
within Firm B to exclude the attorney from the pending
litigation by use of a "Chinese Wall". See LEO #1428.
Committee Opinion
April 28, 1992